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January 26, 2012

Nokia CEO is a coward to not give the exact count of Lumia sales in his Q4 results, the launch quarter for Lumia. So lets do some math based on the available info, to count exactly how many it was.

(Note an update added on April 11 - an update at the end relating to Q1 Nokia profit warning and published Q1 smartphone numbers)

When Microsoft launched Windows Phone a year ago, Microsoft proudly told the world that they shipped 2 million Windows Phone smartphones by HTC, Samsung and others. They soon were spooked, however, when the sales dwindled and dried up and stopped giving the sales breakdown. By the Spring, Microsoft insisted all Windows Mobile smartphones be counted together with Windows Phone - even as these two platforms are incompatible. And still the sales of 'the third ecosystem' kept falling, down to about 500,000 units by Q3. And early numbers from Q4 from Microsoft's best market, the USA, reveal that even more than a year after its launch, Windows Phone sales are still severely lagging its older and obsolete cousin, achieving only 1.4% or about 520,000 units. Windows Mobile meanwhile refuses to die, and in the USA achieved 2.4% market share of new sales according to Nielsen or about 890,000 unit sales.

Thus if you remember seeing a 'Microsoft' market share in smartphones somewhere near 2% for Q3, that includes the better-selling Windows Mobile, and the newer and supposedly better so-called 'third ecosystem; Windows Phone has far less than 1% market share globally.

So with that context, the analysts' consensus estimate for Lumia launch quarter sales was 1.3 million units. We know that didn't happen. Nokia would have proudly celebrated if it had at least matched the expectation, or exceeded it. I explained on this blog why the real comparison target should have been 6.4 million for the first quarter of Lumia sales, and the minimum barely acceptable level was 4 million. But thats neither here nor there. Lets now see what we know, to try to get to the bottom of what Nokia is hiding.

Nokia told us in the Q4 results published January 26, 2012, that Lumia sales 'to date' had passed 1 million. We know its well below 1.3 million. And we know that it includes January sales with nearly a full month of sales of Lumia 710 in the five expansion markets (Hong Kong, India, Russia, Singapore and Taiwan) who only got the Lumia a few days before Christmas in mid December. Also the T-Mobile USA Lumia 710 was never sold in December. For these cheaper Lumia 710 unit sales, the vast majority of their sales will have come after Q4.

The early Lumia markets of Europe that got the Lumia 800 (Austria, France, Germany, Italy, Netherlands, Spain and the UK) received their Lumias from November. As Christmas sales is a peak period, its fair to assume most Lumia sales in these markets did happen in Q4, not Q1.

Lets measure the maximum potential market for the Lumia, based on market measurements. Kantar Worldpanel kindly gave us a summary statement about Lumia sales in Q4, saying that in every market that they follow, which includes most of the big European markets where Lumia had launched, Kantar found that Lumia did not exceed 2% in any single country.

Kantar reported from September 2011 market shares (and looking also at September 2010) that in September 2011, in the five biggest European markets, Nokia's market share in smartphones was 46.7% (as calculated on the basis of a weighted average per capita). So almost half of European consumers today will come to a store selling mobile phone handsets, with an existing Nokia smartphone in their pocket and would expect to replace it with the newest Nokia model.

Remember that Nokia did not have a broad portfolio of new rival smartphones to offer as a rival to the Lumia in these countries. And when 47% of customers walk in asking for the newest Nokia, then try the Lumia, and only (less than) 2% walk out with one - it means Nokia has managed to disappoint 94% of its existing customer base! The Lumia smartphones are so undesirable that more than nine out of ten currently Nokia-owning consumers will try it but reject it. (I said this would happen, especially in Europe, especially with existing Nokia users, but even I could not imagine it would be this bad). That is total comprehensive market failure - even where Microsoft will toss in a free Xbox gaming console to try to entice sales. No wonder Apple's iPhone and Samsung's Galaxy have had a stellar quarter.

These numbers are consistent with Nokia Q4 results (which do not break down the smartphone sales per region - I will do a calculation estimating that mix later on this blog). The overall Nokia handset sales declined 8% from the same quarter a year ago. But in Europe the handset sales (smartphones and dumbphones) declined 24%. Nokia in Europe is suffering far more than globally. And the most revealing number comes from handset revenues by region - which fell by 38%. So where Nokia was gaining revenues by sales of its premium smartphones like the Lumia and the N9, that was spectacularly not happening in Europe in Q4.

LUMIA ESTIMATE Q4

So lets take the European market. Kantar said no more than 2% in any market they measured. Lets forget about 'less than' and use the highest number, lets say every European market achieved 2% Lumia sales. You can't accuse me of trying to suppress the 'success' haha..

We have a convenient point in the global smartphone market to help us with this estimate. In Q3 China passed the USA as the single biggest smartphone country by volume. Europe has sold slightly more than the USA. When we add Canada to the USA to make a 'North America' market, we get actually four almost exactly even sized markets for smartphones - Europe, North America, China, and Rest of World. The total global market for smartphones for Q4 was about 148 million units, so each of these four markets has an individual market size of about 37 million smartphones. Lets do some math!

The 7 big European countries where Lumia 800 had launched in Q4 account for 63% of the subscribers. When we take 63% of the European 37 million market, we get 23.3 million for the countries where Lumia launched. Take 2% of that and we have 466,000 Lumia smartphone sales.

Then the expansion countries where Lumia 710 launched in mid December are Hong Kong, India, Russia, Singapore and Taiwan. These countries account for 26% of the mobile phone subscribers of the 'Rest of World' market so 26% of that 37 million gives us 192,000 smartphones. Except that Lumia had nearly two months of sales time in the first European markets, and only two weeks for these expansion countries, and only days before Christmas, it is definite that if Nokia Lumia can achieve 2% market success across those first 7 countries in about 2 months, it cannot even achieve half of that in only two weeks. But again, lets be generous to Nokia, and lets say that in these next five countries, Lumia achieved half the performance it did in the longer time in the first countries. So we cut the 192,000 in half, and thus Nokia sold 96,000 Lumia smartphones in the next five countries.

We have a total Lumia sales estimate for Q4 of 2011, in 12 countries of Europe and Asia of 466,000 + 92,000 = 558,000 units. Then to add the sales to the stores (there will always be some units in inventory not yet sold) we can call it roughly 600,000 total sales of Lumia during Q4, when measured as Nokia sales. No wonder Elop didn't want to mention the number. And yes, obviously, the Lumia sales account for 0.4% (not four percent, but zero point four percent) of all smartphones sold in Q4. Note we have to add other Windows Phone sales to that number and we'll have about 1% total global market share for Windows Phone the so-called third ecosystem haha..

LUMIA SALES EARLY PROJECTION Q1

And then we can see that if Nokia did about 1.1 million Lumia sales 'to date' - it would mean so far 500,000 more sales in January. Multiply that by 3 to get a full quarter, and we have 1,5 million sales. Add more growth or some more countries and in rough terms, expect Q2 sales for Lumia 800 and 710 to sell approx 2 million units in Q1. Pretty pathetic actually (especially if you are still holding your breath, that Nokia somehow matches that Morgan Stanley projection of 37 million Lumia sales this year haha).

HOW COMPARES TO N9

So Nokia did 600,000 Lumia sales in the most important new smartphone launch in Nokia history. The launch where all factors were totally in the control of the new CEO, without any limitations. He could decide what form factor the new phones would have, what countries to launch in, WHEN to launch the phones, when to ANNOUNCE the phones, when to demo the prototypes, who to receive samples to try them, etc. He had the biggest Nokia launch promotion budget ever, and that was then added to by literally several hundred million dollars of Microsoft marketing money to push the launch - inlcuding those famous free Xbox gaming consoles that you would receive if you bought Lumia 800s with some carriers/operators.

The Lumia first launch countries were not only markets where Nokia was exceptionally strong (having like I said, 47% market share in the installed base ie return customers) - they also were some of the wealthiest nations not just in Europe (UK, Germany etc) but in Asia (Singapore, Hong Kong etc). And they achieved 600,000.

How did this compare to Nokia's N9, where Nokia only had one handset to sell (vs 2 with Lumia). Where Nokia had almost no meaningful marketing support, and selling in many countries of very modest income levels like in Europe Romania, Turkey, Hungary, Slovakia etc - and in the rest of the world such less wealthy nations as Russia, Brazil, Mexico, Vietnam, Bangladesh and Indonesia.

Luckily I didn't have to do the math for this, the nice people at All About Symbian had tracked the numbers (read through the comments) and calculated the limits, finding N9 sales to be between the level of 1.5 million and 2.0 million units in Q4. Wow! Nokia specifically excluded all of its richest and biggest traditional markets where it tried to sell the Lumia, and these countries achieved - lets call it the average, 1.75 million unit sales of the N9 in Q4. So the one N9 outsold both Lumia handsets by almost exactly 3 to 1. And the average price of the two Lumia handsets is far less than the price of the N9.

Obviously MeeGo on one handset alone, with no Nokia support, is outselling all Windows Phone smartphones by Samsung, HTC and Nokia, with the massive Microsoft marketing effort, globally, by about 2 to 1. MeeGo does this in its first quarter when it was not sold for the full quarter. This compared to Windows Phone that is well into its second year of sales. What is wrong with this picture? Did I just see the 'Third Ecosystem' fall from 7th to 8th? Behind Android, Symbian, iOS, Blackberry, bada, Windows Mobile, and now even MeeGo? Why isn't Elop and Ballmer calling it what it is. Windows Phone is the 8th bestselling ecosystem, ie it will never succeed.

But lets go back to MeeGo. So you have cheaper smartphones, sold in the most affluent markets, with the biggest marketing support by Nokia ever, and with massive multi-hundred-million dollar marketing budget by Microsoft. And you get 600,000 unit sales for Lumia.

Then you have the more expensive smartphone, sold in far poorer markets, with minimal Nokia support and visibility, and no partners to toss in dollars, and you sell 3 times more? What is wrong with this picture?

WHY IS ELOP NOT FLOODING THE PLANET WITH MEEGO

The total footprint of the countries where the N9 now sells, covers a smartphone market in Q4 of 59 million units of smartphones sold. And Nokia did 1.75 million sales in it. If Elop had bothered to launch the N9 in all markets, rather than 1.75 million unit sales, he would have achieved 4.4 million unit sales just using this one handset. But there is a second MeeGo smartphone also manufactured today, that Elop simply refuses to sell. Understand, Nokia currently has a second MeeGo superphone, that it has not just designed and tested and put into production. All the big costs are now done. And Nokia refuses to sell this second MeeGo device to any markets! It is the N950, the sister phone to the N9, the QWERTY variant of the N9, much like how the E7 was the sister to the N8 last year. The N950 would sell well in all markets. If we assume it only sold 50% of the level that the N9 is selling now, Nokia would have MeeGo sales of 6.6 million smartphones globally.

Note, I set my target 6.4 million before we had this data. And if only Nokia release the N9 globally, rather than bizarre distant lands like Kazakhstan and New Zealand - and offered the sister phone N950 - even before any real strong Nokia support, the math suggests Nokia would have easily cleared the target I said what Nokia should be able to do today, when launching a new smartphone platform and device. Why Elop only managed 600,000 in Q4 - yes, only one TENTH of what any reasonable expectation would have been - says less about how bad Elop is as a manager, and more about how much the carriers and retail channel hate now Elop, Nokia as it currently is seen, and especially Microsoft, and Windows Phone.

But yes, 6.6 million unit sales is what Nokia had in its hand for Q4 if any sane manager had been in charge. This is BEFORE we consider Elop's personal support of MeeGo and any reasonable marketing support by Nokia, which would boost those sales considerably! Remember, the N9 already is being called superior to the iPhone 4S by some comparisons (the Lumia 800 and even Lumia 900 comes nowhere close to such comparisons). Remember the German newsmagazine Der Stern endorsement that was so glowing, they urged Germans to drive to Switzerland to buy an N9 rather than buying a Lumia 800 today.

HOW MUCH MONEY

The profit margin for the Nokia smartphone unit a year ago, when it was selling the N8, was 11%. As this was the flagship phone, a very conservative estimate is that the profit margin for the N8 was twice that, at 22% (probably far bigger at the time). If we use a 400 Euro price for the N9 and N950, and we assign 22% profit margin - provocativcely now - the total revenues that Elop is now abandoning out of not selling his MeeGo smartphones is ... 6.6M units minus 1.75M units = 4.85M units of abandoned sales to loyal Nokia customers who are yearning for a new Nokia flagship smartphone they can love.

How much is that? 4.85 million MeeGo sales (N9 and N950) at 400 Euros per handset = 1.9 Billion Euros of revenues. Rather than Nokia reporting a 1.6 Billion Euro decline in sales revenues in Q4, with 2.7 Billion total revenues in the unit, Nokia's CEO could have proudly reported an INCREASE of 300 million Euros above the revenues a year ago in smartphones and total revenues now of 4.6 Billion Euros.

And profits? The extra 4.85 million MeeGo sales that Nokia had in its palm, but refused to take, would have generated at only 22% profit margin, additional profits to the smartphone unit of .. 426 million Euros !! So the smartphone unit, rather than reporting a loss of 190 million Euros, would have instead reported a profit of 236 million Euros !

That not only would have been the biggest profit in the smartphone unit of any of the Nokia quarters in 2011, it would have even pulled the Nokia smartphone unit into the profit column for the full year 2011 !!!!

What is wrong with Stephen Elop? How incompetent is he, to take a highly desirable product he has, and refuse to sell it broadly, now when it still is reasonably hot and in demand. This opportunity will vanish in only some months. He is a criminal for not selling the MeeGo handsets broadly now. He is acting against the best interests of Nokia (out of some mis-placed loyalty to Microsoft). Elop must be fired, now!

For anyone still reading this blog, Nokia just issued its profit warning today and I have commented on it and crunched some numbers. The Q1 Lumia sales were disasterous too, at only 2 million - which means that as China had its New Year's gift-giving sales and the iPhone 4S had severe launch problems (some shops shut for several days fearing riots) - the N9 may have outsold all Lumia also in Q1. Read my view of the Nokia Profit Warning and why things are even worse.

for a while i've been trying to think that Elop's strategy was future proof, and although it pained me (Nokia and QT big fan here), i was hopping that his moronic decision to throw out QT and all the engineers would pay up eventually for Nokia's sake.

You kept calling him out pointing his errors. He can't be that dumb, or he wouldn't even be in that top position.

But 12 months later, i think its time to face the reality and give in to the red flags people have been throwing: it was a deliberate decision to cripple Nokia. All the rumours (via Eldar Murtazin) about MS buying Nokia's smartphone division will come true, and it then all will make sense.

But whatever happens now, Nokia faded so much, no one even cares now: from customers to developers everybody is alienated. i could go on talking about the damage done to the "personality" of the brand Nokia, but i guess its pretty obvious.

@Yes Yes just do the math its not that hard.
If symbian sales were in line with Q3, if Wp sold at best 1 million on the quarter, what is there left???
It's easy to extrapolate that at the rock bottom minimum the N9 must have sold at least 1.5 million, just for the math to had up.

The other conclusions are plain obvious and any one should be able to make them... If the N9 was sold globally along side with the N950 and without a Dead On Arrival sticker on its head, one could expect sales at least of 4-6 millions, that would make it a more decent (spectacular?) debut for a new system. Plus some much needed revenue for NOKIA.

Launch of Windows Phone 7 reminds me of launch of another "incompatible replacement OS". This system was called OS/2 and it was launched by "nobody ever got fired for picking it's stuff" IBM. Software companies spent HUGE efforts porting their wares to OS/2 - but users rejected it (because first version required excessive resources, lacked many expected features such as multitasking for DOS programs, etc). Loses across the industry were colossal. Lots of firms went bankrupt. The ones which didn't wowed to never touch OS/2 again.

This meant that when improved and enhanced OS/2 2.0 (no quotes, it really was quite good) was released it had no software! IBM convinced few developers to try again (probably with paying them some money upfront) but this was too little, too late. IBM tried to solve the problem by including Windows in OS/2, but these efforts backfired: yes, it was possible to use Windows programs in OS/2 but that basically meant that you need to spend more money to get the same result. What's the point?

Today we have 50'000 applications is WP7 Market and just a few millions of phones for these application. Developers are ought to be disappointed. If this will lead to the similar level of disappointment among the developers as with OS/2 back then... well, this will be the end of the dream of "third ecosystem".

I'm not saying that this is guaranteed to happen, but watch for the numbers of apps, too. Right now Microsoft still enjoys the same status as IBM back then. And developers are still writing new apps and waiting for the promised bonanza. But how long will they wait till they stop buying the usual Microsoft's story of "We are Microsoft, we can not be denied, we will prevail in the end"? IBM needed about three years from "we can not be stopped" to "Houston, we have a problem" and then five more year till "we don't even use our OS on our own computers". But looks like time is faster in Mobile World...

One big problem for Nokia is trying to sell outdated phones at premium price. The current Lumia phones (including the 900) will sell well - YA! if it is still 2009. Nokia threw out HDMI-out, changable battery, microSD slot, USB-OTG which were present in the its older phones. Why? Maybe to make it lighter? So that its battery last longer? What is this about not needing more memory cos you can store stuff over the cloud? Sure reminds me of the good old days when some joker tried selling disk-less PC cos "everything is on the network".

And Elop stubbornly imply that ALL its competitors are wrong to embrace multi-core CPU. When a man running a race discovers everyone else is running the opposite direction, it will only be sensible to re-evaluate himself - only a fool will laugh at everyone else. I was a Nokia fan, I loved the N95. I had wifi on my N80-IE before all my friends. What happened to innovation? And whatever happen to the Xenon flash?

*Nokia*is*declining*: And Elop stubbornly imply that ALL its competitors are wrong to embrace multi-core CPU.

Nope. Elop implies that multi-core is HARD. Recall the history: both Windows 9X and MacOS Classic never supported - even if hardware had support for years!

WindowsCE similarly has no support for SMP. It's possible to add SMP to existing system, but it takes YEARS. I sure hope Windows Phone guys at least started this work now, or else Windows Phone will be screwed VERY soon.

They may spread lies about "super-lightweight OS" which "does not really need multi-core", but these are so obviously lies it's not even funny. If OS just does not need all that power, then why go with 1.4GHz CPU and not use, for example, 800MHz CPU?

I suspect that answer for other loses is the same: Nokia is hostage of Microsoft developers. If they don't support "Feature X", then "Feature X" is not available on Nokia phones.

the answer to your question is simple, because Microsoft Windows Phone platform does not support HDMI (or in other word a multiple screen), microSD slot (because it's a wall garden a.l.a iphone, where we need zune on PC to access the file, but not all files), USB-OTG (again, because WP7 does not support it, microsoft don't want people able to copy file without computer, and as for USB-OTG mice&kb, it because it's not supported in WP7).

If you follow the thread at AAS (allaboutsymbian.com), you'll read that:
from Nokia Financial Report PDF, that SALES OF SYMBIAN WERE DECLINING...
So, the 1.5 million N9 number is the WORST NUMBER that taking into consideration that sales of symbian smartphone is the same as last quarter.

In other word, sales of Nokia N9 ****IS**** more than 2 million unit.!!!!!

You copy a no sense post from All About Symbian, that N9 sold 1.5 to 2.0M unit.
You did not verified.
Yes, in the PDF from Nokia it is written that Symbian sales have been declined ... yes, but it always related to Year/Year, not Quarter to Quarter.

So, 1.5M N9 is pure fantasy.

About increase of ASP of Nokia ... again ... nobody is thinking, in the SmartPhone sales Nokia did added the 180M euro got From Microsoft, inside there are also the IPR paid by Apple, estimate other 150M or more euro ... so ASP was well below 130 Euro on Q4, in decline both Y/Y and Q/Q

would just like to point out that even if the n9 only sold 500,000 units (half the number of. Lumia), that is still an embarrassingly large number for Elop and co.

The N9 was only available in tiny markets, is using old HW and was expensive, the Lumia went to Nokia's leading markets, was heavily advertised, was heavily subsidised, and uses much fresher HW (that was originally intended for the n9 successor).

You would expect to see 10 Lumia's sold for every n9. If Nokia had put as much effort into the N9 as Lumia, you could easily expect them to sell many more N9s then Lumias (and my, possibly incorrect, understanding is that they could have manufactured more n9s than the Lumias they did manage to make).

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Tomi Ahonen is a bestselling author whose twelve books on mobile have already been referenced in over 100 books by his peers. Rated the most influential expert in mobile by Forbes in December 2011, Tomi speaks regularly at conferences doing about 20 public speakerships annually. With over 250 public speaking engagements, Tomi been seen by a cumulative audience of over 100,000 people on all six inhabited continents. The former Nokia executive has run a consulting practise on digital convergence, interactive media, engagement marketing, high tech and next generation mobile. Tomi is currently based out of Helsinki but supports Fortune 500 sized companies across the globe. His reference client list includes Axiata, Bank of America, BBC, BNP Paribas, China Mobile, Emap, Ericsson, Google, Hewlett-Packard, HSBC, IBM, Intel, LG, MTS, Nokia, NTT DoCoMo, Ogilvy, Orange, RIM, Sanomamedia, Telenor, TeliaSonera, Three, Tigo, Vodafone, etc. To see his full bio and his books, visit www.tomiahonen.com Tomi Ahonen lectures at Oxford University's short courses on next generation mobile and digital convergence. Follow him on Twitter as @tomiahonen. Tomi also has a Facebook and Linked In page under his own name. He is available for consulting, speaking engagements and as expert witness, please write to tomi (at) tomiahonen (dot) com

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